What does it take to build a skyscraper? A Frontier Markets’ perspective

What does it take to build a skyscraper? A Frontier Markets’ perspective

Skyscrapers are perhaps the most visible sign of progress and economic development. Since the late nineteenth century, countries and cities have used skyscrapers as a way of asserting themselves and developing an identity which indicates that the city/country is a place to watch, it matters and it is rising.

Those countries that have been developed for centuries had long resisted the allure of a skyscraper until the 1960s when France established La Defense, London built Centre Point, Rotterdam built Erasmus MC, and Frankfurt built the Buro Center. Developing countries, or more specifically countries with something to prove began the first skyscraper boom in the 1930s when skyscrapers were being completed daily across North America, Latin America, and East Asia. The second era of skyscrapers began in the 1960s and barring a few periods of dormancy has persisted to this day. The 2000s began a renewed fervor over building skyscrapers with the rise of China, the Middle East, and Russia.

Today, there are over 6,000 skyscrapers in the world and over 90,000 highrises[1]. Skyscrapers generate a tremendous amount of attention and engender pride within a city and/or country’s populace. This is evident in stories of Tapei 101 and the Petronas Towers in Malaysia.

Skyscrapers are noteworthy accomplishments for a city or country. Well-constructed skyscrapers require a very significant level of infrastructure and resources for their construction and ongoing maintenance. It is for this reason that we think that any country capable of constructing a well-made skyscraper, is a country that has a sufficient economic base to grow rapidly. There are of course a few caveats with this perspective, countries that are too small from a population or lack density cannot justify the construction of a skyscraper, and are wise to avoid the construction of such buildings.

For those that do decide to construct skyscrapers, be it a push from a private developer or from the government, a material number of resources must be in place for the project to succeed. North Korea’s Ryugyong Hotel is probably the best example of an attempt to construct a skyscraper that goes horribly wrong due to a lack of resources and infrastructure to support its construction.

Ingredients for a successful skyscraper

Zoning

Before a skyscraper is contemplated, the zoning of a city must permit the construction of a very tall building. This zoning requirement may be fast and loose in certain Frontier markets, but it is unlikely that a developer would proceed without the appropriate zoning or government approval. Zoning implies that high-density construction can be completed in a specific area and that the soil and environmental conditions allow for the construction of a skyscraper. Relevant factors to consider include the distance of major airports, constituents that would be impacted by the lights of a skyscraper (such as observatories), any fauna that is endangered whose survival would be threatened by construction, and most important of all, sufficient property rights to protect a developer’s investment in the project.

Without property rights, it is unlikely that any developer or agency would proceed with construction. Places like India have long-resisted providing zoning permissions due to concerns over infrastructure. Zoning is often controlled by metrics such as a permitted FSR (Floor-space ratio) and Mumbai for example, has long resisted loosening its restrictions because of its inability to provide services to tall buildings. Such restrictions are indicative of India’s wider challenges.

Infrastructure

Infrastructure covers a wide variety of features, but at its core, it refers to a city/country having the resources needed to sustain and maintain a skyscraper. High-density construction puts tremendous pressure on municipal services such as sewage, water, electricity, and garbage. If the power grid, sewer lines, or waste collection is inadequately serviced a skyscraper would put such a strain on an area that it would result in a failed construction project. Skyscrapers due to their cost, cannot evolve to serve other purposes the way a low-rise building can.

Infrastructure also refers to other needs that a skyscraper necessitates such as adequate transportation to enable large numbers of people to travel to and from the skyscraper. Cities with inadequate roads/highways or public transportation will find the ability to build materially handicapped.

Construction equipment and materials

A skyscraper as you may imagine requires a tremendous amount of equipment, chief among them pile drivers, cranes, and scaffolding. A city/country needs civil engineering firms and construction equipment firms that can supply sufficient amount equipment to facilitate the construction of a skyscraper. Of course, in today’s globalized world, this equipment can be imported, but regardless, the point is that it is necessary for construction. A country would be unable to source equipment abroad unless it is able to pay for the equipment, which would imply a stable currency or markets that would enable such transactions. A good overview of the types of equipment needed is available here.

Materials needed are primarily a large amount of steel, concrete, sand/glass. Absent any of these, it is near impossible to build a modern skyscraper. A city would be hard-pressed to construct a skyscraper without access to local concrete suppliers. Concrete is difficult and inordinately expensive to ship and utilize, so a stable supply domestically is critical. Steel can be imported, but also works best when steel mills are there domestically to provide the needed materials. Glass is most often imported but the appropriate installers and labor are needed locally to install the equipment.

Economy

Traditionally, other than in command economies (Russia, China), demand is needed to facilitate the construction of a skyscraper. Adequate population density and local wealth generation are critical for the success of a skyscraper. Skyscrapers rely on high rents or proceeds from condo sales to sustain and maintain the construction. Skyscrapers need to be seen as landmark locations where commercial enterprises or locals desire to be located there. This is difficult if the economy cannot support the construction of such buildings, failures happen such as what has happened in Caracas, Venezuela.

How many skyscrapers do our Frontier Markets’ countries have?

See the table below which shows how many highrises are in each of the Frontier Markets we cover, you can see that the results vary widely. What is noteworthy is those that have none or close to none, relative to their population. These are the places that we love to track because any building boom would suggest a development of the industries needed to sustain skyscraper construction as well as an economy that must be doing pretty well.

The figure below is plotting GDP per capita to population per highrise in each country we cover. What it indicates is that up to about 10,000 GDP per capita, a country may or may not have highrises, but after that it is entirely unlikely to have more than 200,000 people per highrise, which suggests that skyscrapers are a necessary component of economic development after a certain point, in the same way as a country must become more urban than rural in order to achieve economic growth past a certain point.

Top 30 Tallest Buildings in our Frontier Markets Universe

These are the top 30 tallest buildings in our Frontier Markets Universe.

Definitions

High Rise is 12-40 stories, for our purposes, a highrise includes all skyscrapers.